Mortgage fraud: an understanding The credit-enhancing mortgage and builder bailout programs
Ironically, there can be just as many victimization schemes as there are helping hands available when people are in need. Unfortunately, shady people can still infiltrate the housing industry.
Mortgage fraud is rife in the sector and is one of the nation’s fastest-growing “white collar” crimes. It is identified by any significant false statement, misrepresentation, or omission that underwriters rely on when acquiring, protecting, or funding any mortgage.
Two Types OF Fraud
Mortgage fraud is primarily driven by one of two things: profit or property.
Multiple false statements made by numerous professionals in numerous loan transactions constitute fraud committed for financial gain. Fraud for profit schemes include everything from incomplete debt disclosure to overstated income and assets.
Property fraud typically happens on a smaller scale between a borrower and a bank. The borrower might give false information about the value of their home or their personal debt, and they might also have trouble making their down payment. Industry experts might occasionally be involved.
The Builder Bailout
Many newly built homes are still unsold as a result of the current housing market’s fallout. As a result, many builders are searching for a way to liquidate their inventory of unsold homes because they need to fulfill the requirements of their contracts and loan terms. Sadly, too many people fall victim to the so-called builder bailout scheme.
In this case, a fraudulent home sale is made to appear legitimate. This requires more people than just the builder themselves in order to be successful. Real estate appraisers and settlement agents are examples of these people.
There are numerous scenarios that could occur because a builder bailout scheme is complicated. One is the creation of one or more fictitious corporations that later buy the unsold homes at inflated market values. Since the builder is covering all closing costs, the fictitious corporations are also responsible for loan repayment.
Builder bailout schemes can be identified by the aggressive marketing of no money down purchases, excessive incentives for home purchases, and an uncertain source of funding.
Credit Enhancement
Even though lending requirements are frequently stricter during these times, they must still be met in a down housing market. Additionally, credit enhancement can offer a solution, albeit an illegal one, for those would-be homeowners who desperately want to own a home.
In credit enhancement, a perpetrator of mortgage fraud boosts the borrower’s credit score artificially. There are many changes that can be made to make an applicant’s credit look good. These may involve depositing money into the borrower’s accounts, adding information to the borrower’s credit history, such as credit lines, or even giving the applicant a down payment.
The best case scenario is to avoid raising an industry red flag, but mortgage watchdogs are using more advanced methods of tracking and identifying fraudulent practices. Anyone who participates in a mortgage scheme faces heavy fines as well as protracted prison sentences once they are discovered.
In addition to avoiding being talked into signing shady documents, becoming a victim of mortgage fraud can be avoided by getting referrals for all professionals being worked with.
